Meet the billionaire who believes in the future of crypto

  • By Harrison Cole

  • June 16, 2018
  • 1:16 am BST

You’d be forgiven for becoming disenchanted with the future of cryptocurrencies given the meteoric yet unsustainable upward swing that currencies such as Bitcoin enjoyed towards the end of last year. Of course, there was the inevitable pull back, but not nearly enough to erase pre-bubble gains. That kind of run is rarely seen and if it were a stock, classic theory would have it that there’s little room for more significant growth as a result. But crypto, it seems, makes up the rules as it goes along, with possibly the only reliable rule being: expect the unexpected.

Except, that is, if you are billionaire and former Goldman Sachs and Fortress trader Mike Novogratz apparently. This is the man who, at the recent Invest Summit, declared that crypto’s late 2017 and early 2018 upward trends were anything but a bubble, reflecting the possibilities of the application of future trading strategies.

In fact, Novogratz goes even further, asserting that we’re only now starting to get a first look at the potential of cryptocurrency. A recent Coin Insider report relays Novogratz as predicting that the $20 trillion mark was on the cards for international cryptocurrencies soon. Unphased by the fact that the currency has recently pulled back, he says that if the rapid upward rise was a bubble, the currency would have been dead by now – which it clearly isn’t.

Bubble or revolution?

 To what does Novogratz ascribe his non-bubble theory? By likening it to the internet of the 90s. The rise of crypto and its next steep upward steps are part of a revolution, he says, because people from every corner of the globe are taking part. By contrast, the internet bubble was insular – only rich, ‘homegrown’ US participants were playing.

Is there a correction coming?

 It depends how you see a correction. Novogratz accurately predicted that after this dip in mid-2018, cryptocurrency would correct itself. The correction he is speaking of is, of course, an upward one. So far, crypto has peaked at $900bn but the billionaire thinks that peak will keep moving higher until it reaches a summit 20 times higher.

With the view from the top being dizzying, how does the mogul see the currency manoeuvring itself there and staying there? While retail and individual investors have driven the industry up until now, Novogratz believes that the next phase will see institutional investors in the driving seat with their feet on the accelerator pedals.

As with anything in life, he ascribes this to FOMO or the fear of missing out. He believes the first brave move will be made by a big market leader such as a huge pension fund dipping their toes into the inviting crypto waters. All it takes is one such leader to give it legitimacy and credibility, he notes. Once the first one dives in and things remain fine, it will be number two, three and four, until all the rest are jostling for position in the crypto pool, hoping they didn’t dive in too late.

There must be something to his theory, because the best indicator of future performance is past behaviour – even when doing financial analyses, which is sound forex trading advice. And the same thing happened when Bitcoin became colonised by individual and retail representatives: once the first big name was in, everyone wanted to follow suit. Without a doubt the fear of missing out on gains and financial reward is a big motivator indeed; perhaps the biggest plus when it comes to crypto is endorsement. As it is an unknown, credibility is the issue. And as with any reputational crises, word of mouth is the best endorsement. So once the first institutional investor starts singing, it is indeed possible that everyone will want to join the crypto choir.